The Houston Chronicle published an article detailing out that the Houston housing market has seen the biggest drop in home sales since the start of the COVID lockdowns in early 2020.
Coupled with the doomsday predictions about crashes in the real estate market nationwide, and rising interest rates, articles like this can have the effect of making the current pool of home buyers nervous about purchasing a home.
But, is the greater Houston area really at risk for a housing crisis?
First, we need consumers to understand that the real estate market is a hyper-local scene. Just because the market in Boise, Idaho is experiencing price cuts in 61% of listings doesn’t mean that the same thing is happening in a different metro area. According to a July 2022 article, the top ten market areas seeing price cuts in their current listings are:
- Boise, Idaho: 61.5%
- Denver, Colorado: 55.1%
- Salt Lake City, Utah: 51.6%
- Tacoma, Washington: 49.5%
- Grand Rapids, Michigan: 49.3%
- Sacramento, California: 48.7%
- Seattle, Washington: 46.3%
- Portland, Oregon: 45.7%
- Tampa, Florida: 44.5%
- Indianapolis, Indiana: 44.1%
However, there are a few things at play here in this Realtor’s opinion.
First, houses were appreciating at record levels month over month for the last two years in most markets. Record low interest rates brought on one of the strongest seller’s markets nationwide in history. As interest rates rise, housing prices are starting to stabilize in many markets.
The pricing method most agents had been using for the last two years of “make it X grand higher than the most recent comp” no longer works. Some price reductions we’re seeing are a result of agents who didn’t get the memo prior to pricing the home.
Some are happening as a result of sellers who refused to get the memo, and have had to adjust pricing after sitting on the market for several weeks or months and finally accepting that they missed the national pricing insanity window.
But a national cooling doesn’t mean every area in the country is experiencing a cool down at the same levels.
In the Houston area, we seem to simply be cooling to what used to be the norm pre-pandemic. are still, technically, in a seller’s market. A balanced market between buyers and sellers is considered about 6 months of inventory.
In July, the Houston housing market was at 2.6 months of supply. Are houses flying off the shelves sight unseen for tens of thousands over asking anymore? In most cases and price ranges, no. But, prior to the pandemic it was normal for a home to spend weeks or even months on the market.
And while home prices may be decreasing this month over last, they are still significantly up over the averages the Houston area experienced prior to the pandemic – significantly.
Additionally, Texas remains the number one state experiencing population growth in the country. But, it wasn’t just the population influx that skewed the Houston housing market into buyer insanity over the last few years. Houston, Texas was also one of the top housing markets targeted by iBuying companies that were making instant cash offers for homes.
But as of recently, iBuyers are slowing down their home purchasing which is also removing some additional buyer competition from the market.
All in all?
Texas is still the number one state people are moving to with the Houston Metro specifically being one of the top 5 fastest growing metros in the county. Texas has the 9th strongest economy of states in the U.S. iBuyers are beginning to tighten up, easing up competition for real, owner-occupant home buyers, allowing them to be a little bit pickier and a little bit slower in choosing a home. Inventory in the Houston area still leans to a seller’s market.
From where I stand, the biggest dampener on the Houston area real estate market is the current state of mortgage interest rates. But, from a historical perspective, they are still at all-time lows (though not at pandemic lows) and Fannie Mae is predicting we could see them fall below 5% again in 2023.
Breathe. From where I'm sitting, I think the Houston area will be ok.